Mining Investing from Magazine Hot-Stock-Picks and Reports of Tailings Failure

There is no such thing as a typical mining investor. That much was brought home to me today. I had just finished presenting the first of three, three-hour webcasts on understanding the risk of investing in mining. I had just sat down at my desk with a cup of coffee. The phone rang and the receptionist asked if I would take a call from a lady who had a question but no answer. Intrigued, I took the call to find a pleasant, intelligent lady on the other end.

She asked if I knew of a formula that gave you a single answer to the question: what is the mine worth? She said that she had read an article in a magazine that said that using such a formula. the value of a Junior Mining company’s prospect in the Yukon was many millions. She said she found a formula in an Australian book and she used it and got a value in the billions. Her question: is she right or is the magazine article right?

I skip the agony of trying to identify the magazine, the Australian article, or the true value of the company. She gave me the name of the company and I looked up some basic data. Seems they have had good drill results and have sent off some core to SGS to assay. The do not have the assay results back yet.

I advised her to be patient, wait the assay results, not rely on formulas from any source, and certainly not rely on magazine articles for hot-stock-picks.

She thanked me profusely and said she had to go to attend to a personal issue.

Have warmed my coffee, I was interrupted by someone who just had to comment on the webcast. They pointed out that I am giving lots of detail. “How many investors care how the mine manages its heap leach pad or tailings impoundment?” was their main point.

I conceded that few investors probably knew or paid attention to the mine’s waste disposal facilities until they failed and put the mine out of business. Keep in mind there were an unreported five tailings impoundment failures last year alone. Most were banned from the new cycles by fast lawyers and investment advisors. Ample reason to be wary as an investor, in my opinion. I pointed out that one failure I know of occurred at a mine belonging to a major mining company—I am not allowed to talk of it, but it affected stock prices. Luckily I had none to be affected, but others were not so lucky.

And so it goes. Each chooses their own way to get information and choose mining investment opportunities. Let us know of your approach. It may be better than mine or average.

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